DEEPEN THAT RELATIONSHIP
Investing is more than numbers
By Harland Merriam
You and I often have tens of thousands of dollars on the line. Sometimes even hundreds of thousands, don’t we? This is what it takes to be investors in multi-family complexes.
Someone finds a property, puts it under contract, forms an LLC or legal entity, and invites investors like us to join them as passive partners. In effect, we put up the risk capital and the down payment to secure a larger loan. Usually, these opportunities are limited to people who can invest $25,000 to $100,000, or more.
How well do you know the general partners who put your deal together and manage the apartment complex in which you are invested?
I am one of those general partners. I take very seriously the responsibility I have for the huge investments of our more passive partners in our apartments. I work really hard to keep each of them informed as to what is happening with their investment.
The other general or managing partners and I want our investors to know us and to know the property in which they are invested.
We communicate in writing at least every quarter. Often, we will provide additional written communications as much as monthly. We also welcome phone conversations and opportunities to sit down and talk about their investment.
In a couple of weeks, we will meet with several of our investors on site at an apartment complex so they can put eyes on the property, meet the staff, and get questions answered.
We realize our investors have made a huge investment and are taking significant risks with their money.
We also realize the flexibility for our investors is limited.
Unlike stocks and bonds and mutual funds which can be bought and sold easily with a few clicks of a computer mouse, most multifamily investment partnerships are not as liquid.
It may be difficult and take quite a while to find a buyer for someone’s interest in our deal. And the value is up for negotiation.
This is one of the reasons for making sure you have a deep, solid relationship with the operators or managing partners of your investment. As it is often said, you want to “Know, like, and trust” them.
You are likely tied to them in this investment over a period of many months or years. Do you see the importance of building and maintaining a deep relationship with your operators?
One of my military commanders told me years ago “You are responsible for your career.” What he taught me was to keep good records, understand what was needed to advance, and take the steps necessary. He wanted me to look out for myself.
This is good advice for us as investors. “You are responsible for your investments.” Do you have good records? Are you keeping up to date with what is going on at the apartment complex? Do you know your options? Are you getting your questions answered satisfactorily?
BEFORE we make our investment in the first place, we are sure to perform the required due diligence. Think it through. Understand the potential risks and benefits. Read the stack of documents. Ask a lot of questions.
CONTINUE to keep informed beginning on the day of the closing. Keep in touch with the general partners. Know what is happening.
Your managing partners may give you access to an investor portal on your investments. This will often give you information on the rent roll, delinquencies, cash flow, and issues at the property.
If you don’t have an online portal, expect to receive regular written reports from your operators.
SEEK GUIDANCE. I was fortunate in the military to have several excellent mentors who helped me along the way. This is a good idea for us as investors, too, isn’t it? I know I count on several experienced friends and call on them regularly for their counsel. They steered me well over a 30-plus year career.
Who is steering you when it comes to your investments?
Find a “third party” experienced investor to guide you on your investment journey. In addition to the operators, build other relationships that will serve you, limit the risks, and increase the return on your investments. Be a responsible investor.
We encourage our passive investors to reach out to us whenever. We really do, really do, appreciate those who take the initiative. They help us better know what they are thinking and feeling and what they want and need from us.
It is a win-win when our passive investors reach out to us.
I talked with several of our investors over the past week. They asked some great, appropriate questions. A few of them had good ideas of how we might address some of the challenges of one of our current properties.
Every time we talk, we get to know each other better. We are building deep relationships.
IN THE COMMENTS
I would be interested in your comments about some of the best practices (and some of the horror stories) of your relationship with your investment partners.
What have you learned about the value of getting to know one another?
Give us some feedback in the COMMENTS.
HELP US GET TO KNOW YOU BETTER
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Through the power of a syndication partnership with other investors like you, working with managing partners who are experienced in managing apartment complexes, you can own multifamily assets.
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Harland leads our Investor Relations. He is a “repurposed” Pastor and Army Chaplain. He is an author, speaker, mastermind facilitator, and coach. Harland lives with his wife, Barbara, in DeLand, Florida.